That Was The Week Buy The Dip Became Sell The Top
Many years ago I jokingly surmised that the market gets childishly enthusiastic on Monday and so on Tuesday the adult in the room tells the minions to sell. So on Thursday the buying frenzy happened, followed by the plummet. You have to question if A.I.(which is definitely 110% not going to kill us) is playing the up day down day game. Traders often follow what they perceive to be ‘momentum’ so you get the schoolboy football effect. Everybody charges down the pitch in a huddle. Curiously a trading advert showed a ‘successful’ trader’s method with his 11yr daughter. He use the words supply and demand, obvious really but he based this on candlestick charts. We like and use candlestick charts.
In other news:
inflation is the news again. Well over 3% although Bank of England kept our rate on hold, while America’s Federal Reserve raised rates 1/4%. The carry trade, borrow Japanese Yen at 1% and buy US or other debt at >4%. Hedge currency risk or not it’s been free money for so long. And for no apparent reason. Why on Earth didn’t Japan charge more to foreigners? Answers, please, to the email address at the bottom of the page. Inflation is fuelling an epidemic of shoplifting, which in turn creates……. more inflation. It’s a doom loop which is not easy to control. Funny that for fuel we pay A.I. says: Diesel prices vary, but UK averages have recently shown diesel around 100.19p per litre. No.no, no what the heck is wrong with you? Diesel is 193 a litre= £8.68 a gallon. US? $6 = £4.47 And they complain!
In other news, you can buy a share in the Indian Stock Exchange, which, by volume is the world’s largest derivatives exchange, for……. 12p. https://www.chittorgarh.com/ipo/nse-ipo/3151/
It may be that we cannot own these shares, but seems like a no brainer to me. I’ll wait until they are 6p, then procrastinate.
In The Inbox
Larry McMillan is only one of the speakers: https://www.metastock.com/offer/event/?whc=traders-conference&pc=eq-mcmillan&mc_cid=1c0061e290&mc_eid=5f15d5ff5d
This is a 5 day event! It’s free of course, I’d never suggest paid events in the finance world, we’re awash with opinions, methods etc.
This promises a 7 point check list for options but for the life of me I have yet to download it successfully. Good luck.
The excellent Jim Mellon’s commentary and frank exposé of his investing. He’s good https://masterinvestoruk.substack.com/?utm_source=substack&utm_medium=email
Distraction Trades
ADA was $0.2091now $0.2248 Wild swings this week. Has this cheapie bottomed out? Or is it headed for $0.03 again?
XRP was $1.3722 now $1.4205 Crypto -it’s a mystery! I like this source https://coinmarketcap.com
DAX : Under review after poor record lately. 3no entries two trades 400nett Old method 300 in 1 trade!
UK Gilts Were £15.20 now£15.26 This is based on the Vanguard ETF. (VGOV) The sheer panic instilled in us is not justified. Remember this ETF has a yield of 4.61%
Silver: Using Wisdom Tree Physical Silver(PHAG) $58.61 now $60.37 Good for you if you climbed on board at $52. Do not follow me but if you have to own silver, this ETF is backed by Physical. I’m on the sidelines as I took my eye off the ball when it was $52.
Legacy Trade 424 and New Trade 484 100% winners 4/4.
Trade 424 High Roller, This is a Trade Gone Wrong
PRECIS: We started from a July 2025 losing trade as below. Short calls are rarely a good idea.This was a ratio spread 8450/8650 calls
In summary we have an old trade from July 2025 which is a loss of 1741 against the credits taken in, of 422
So, cost 1606.5 to close, buy to open for July 1640. A credit 33.5 ( Running income 422 )
8500 2035.5, 8700 1836.5(x2) gives us –1637.5
Then:
Rolling on Thursday meant going lower to 8400/8600 which gave us 17450 against the cost of closing out 16520.5 = 930, running total of income 930+422 = 1352
Still a horror show but the plan is to illustrate the ‘sunk cost fallacy’. It’s always better to close out losing trades, but we can run things to the end of days
8400 2355 8600 2155=1955 rolled to Sept (on Thursday) 8400 2379 8600 2180 = 1981
Credit 26 Rolling income 1352+26 = 1378
Was: 2441,2241×2= 2041 Time to look at rolling to Oct. 2464.5, 2266×2= 2067.5 Can we do better in the next 2 weeks?
Now: 2253.5, 2053.5 (x2) = 1853.5. Rolling to October 8400 call 2280.5, 8600 call 2082(x2) = 1883.5 CREDIT 30 (Rolling credit now 1408)
8400call 2266.5 8600 call 2067.5×2 = 1868.5
Trade 480 We’re Going To try The Worst Trade, The 1-1-2
SanJose Options have featured this and also mentioned it can be a quick death. The trade is this: Buy one option, we use a Put, sell a lower put and sell 2 lower puts.
The strikes and numbers: buy 10750, sell 10600 sell 2x 10500 gives us: 85.5, 49 and 35×2= 33.5 Credit
Frankly I have never seen such a skewed market to the upside, so this may be an easy win.
NB SJ Options will talk about Vomma, Vanna and Lamda when what they mean is if the market takes a dump, you’re in the brown stuff. Rocket science it is not.
63, 31.5, 21(x2)= minus 10.5 (Our Credit was 33.5 so a nice result. We run it of course )
Now 54.5, 25, 16(x2)= 12.5 That went the wrong way!
10750 124 10600 46.5 10500 23.5 (x2) Gives us 30.5 Credit Total 63.5 WIN! run to expiry for fun
At expiry: 10748 profit 2+initial credit. The best we could do was last week’s close out. WIN!
Trade 481 Strangle In The Back Half (?)
The TastyTrade standard is to sell (write) a strangle about 45DTE (days to expiry) when this was worth 94.5 for the Calls and 70.5 for the Puts.
We’re doing this with 21 days, to expiry, but here’s the twist, we’re also going to run the October strangle -same strikes 79.5 and 72. Total 151.5
So here’s our trade: .16 Delta put 10550, 25.5, and the .18 Delta 11050 call, 22. Clearly this has lost a ton of value, but hindsight is of course 20:20 vision.
As promised an analysis of the one example, which may well justify the Tasty Trade approach as they would have closed out at 50% profit.( They’d actually take the October trade on Tuesday)
Tuesday: Oct trade to open: put 78, call 72.5 was 62, 77.5 now 22.5 102.5 Theta is helping and vol is still low
Our Sept trade was : 20, 20.5 Now 1.5, 33 Going the right way but not great our credit to open was 47.5
Expiry 10748 so we keep ALL the premium taken in 47.5 WIN!
Trade 482 My favourite
We’re going with a short term(Sept expiry) put ratio spread, we buy the 10650 for 32, sell 2x 10500 for 16 apiece. Zero cost, margin required. Now we have no upside risk, downside risk is at 10350. Max profit 150 It has its critics but Tom Sosnoff from Tasty Trade lists it as number 2 of his favourites.
Now: 66 and 23.5 (x2) =19 Credit We run this
Best we could do was 18 WIN!
Trade 483 Straddle And Be Damned!
We saw how last month it was sheer folly to buy the straddle so this week, and this is not recommended in these troubled times( Trump faces impeachment next week) We SELL the straddle 10650 call 71, put 66. So 137 Credit Our risk is at 10650 ± 137= 10513, 10787 This is a punt not a serious trade but if it goes wrong we’ll look at repair. Remember the market has to chase us for the money.
Laugh out loud! This got crazy, during Thursday at expiry the 10650 call was worth 98, so we make 39 WIN!
Trade484
October options are upon us. What to do?
Wash, rinse and repeat let’s do that calendar ‘ratio’ spread using Puts. We sell: Oct 10250 put 43 We buy: Nov 10400put 126, we sell the Nov 10250 put which is 94.5.
So we have a long PUT spread 10400 -10250, and an October put that we sold at 10250. Credit 10.5 Risk <10200 Max reward, 160 no upside risk.
Glossary:
There are two types of options: Puts, give you the right but not the obligation to sell the underlying asset . Calls give you the right, but not the obligation to buy the underlying asset.
When you sell those options, the opposite happens, with puts you get stock ‘put‘ to you at an unfavourable price (or not) and calls you get the stock you own taken, or ‘called’ away. If you don’t own the stock you need to stump up the cash, but in both cases with the FTSE index they are cash settled at £10 a point, so losses and gains are uncomplicated.
Please read the links below for a more comprehensive explanation in simple terms. Options are about mindset, only a modicum of intelligence required.(I’m living proof)
For those new to options:
https://optionsinvesting.co.uk/special-edition-how-options-work-1/
https://optionsinvesting.co.uk/special-edition-how-options-work-2/
https://optionsinvesting.co.uk/how-options-work-page-3/
Contact: surreyhantstraders@gmail.com.
If there is anything you’d like help with, we all started somewhere and yes, it can be baffling. There are no stupid questions, give it a whirl. (AI gets things wrong, remember)
All opinions expressed here are not to be taken too seriously and all of the trades are for educational purposes only.